Google uttered bAdWords – says Full Federal Court

In the decision handed down on 4 April 2012 in ACCC v Google Inc [2012] FCAFC 49, the Full Federal Court of Australia (Keane CJ, Jacobson and Lander JJ) unanimously upheld the ACCC’s appeal against Google for misleading and deceptive conduct concerning the search engine’s manner of online advertising. The Full Court found that Google itself (as well as the relevant advertiser) had engaged in misleading and deceptive conduct. The finding is predicted to have wide-reaching implications for the search engine industry and online advertising in general, a sector over which Google has a far-reaching monopoly.

At first instance, there were two distinct aspects of the claim made by the ACCC against Google. The first was in relation to the overall layout of Google’s results page. It was alleged that this layout failed to distinguish between the “organic” search results and the “sponsored links” which appeared in a faint yellow box at the top of the results list and to the right-hand-side of the results list. This overall layout was said to be misleading and deceptive in contravention of s 52 of the Trade Practices Act 1974 (Cth) (the law at the time the relevant conduct occurred). This aspect of the ACCC’s case failed at trial and was not contested on appeal.

The second aspect of the ACCC’s claim at first instance afgainst Google involved eleven distinct advertisements that Google published on its results pages. It was said that each advertisement was misleading because in each instance they included a heading comprising a trading, business or product name of the advertiser’s competitor, but when the link was clicked upon, the navigator was taken to the advertiser’s website. One example was:

Harvey World Travel

www.statravel.com.au Unbeatable deals on flights, Hotels & Pkg’s Search, Book & Pack Now!

At first instance, Nicholas J found that the sponsored link represented that there was an affiliation between the two competitor companies and that these representations were misleading and deceptive. The other ten specific advertisements were considered individually and six of them were considered misleading and deceptive based on the specific wording of the advertisement and the evidence led in the proceedings.

The question for the Full Court was whether Google was the maker of the misleading representations. At first instance, Nicholas J had held it was not. It was said that ordinary and reasonable users of the search engine would have understood the message being conveyed by the advertisements as one from the advertiser, rather than the publisher. To use the Harvey World Travel advertisement as an example, consumers would not have understood the sponsored link as Google making the misleading representation – it was the advertiser telling the consumer this information. It was advertiser who was the person engaged in misleading and deceptive conduct for the purposes of s 52. Nicholas J said Google did no more than represent that the sponsored links were advertisements; Google was a mere conduit for the advertiser.

The Full Federal Court disagreed. At the outset of its discussion, the Court noted the question of whether a corporation has engaged in misleading conduct or has merely acted as a conduit for another is a question of fact. The facts as found in the present case meant that Google had engaged in such conduct. As the Court noted at [87]:

“No user of Google’s search engine presented by Google with a sponsored link in response to a search query would regard the sponsored link displayed by Google with a clickable link to the sponsor’s URL as conveying the message that the sponsored link is a statement by an advertiser which Google is merely passing on. What appears on Google’s wfebpage is Google’s response to the user’s query. That it happens to headline a keyword chosen by the advertiser does not make it any the less Google’s response. And even that occurs pursuant to the AdWords facility made available to the advertiser by Google. Google’s conduct cannot fairly be described as merely passing on the statements of the advertiser for what they are worth. In those circumstances, it is an error to conclude that Google has not engaged in the conduct of publishing the sponsored links because it has not adopted or endorsed the message conveyed by its response to the user’s query.”

In coming to this conclusion, the Full Court cleared up some apparent judicial confusion with respect to various authorities concerning where a publisher will be liable for misleading or deceptive conduct. At trial, the ACCC had placed significant reliance on the decision of Universal Telecasers (Qld) v Guthrie (1978) 18 ALR 531 where it was held that a television broadcaster was liable under s 53(e) of the Trade Practices Act for making false or misleading statements concerning the existence or amount of an advertiser’s price reduction. At first instance in the present case, Nicholas J had said that the law had “moved on” significantly from Guthrie and the case was not relevant in determining whether Google had engaged in misleading conduct. However, the Full Court made it clear that (contrary to Nicholas J’s view) the decision in Guthrie had not altered to the legal operation of s 52, noting that in neither York v Lucas (1985) 158 CLR 661, Butcher v Lachlan Elder Realty Pty Ltd (2004) 219 CLR 592 nor ACCC v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305 overruled Guthrie. The Full Court said all these authorities were consistent, their effect being that the intermediary’s conduct (i.e. Google’s conduct in this case) must be considered as a whole in order to determine whether the intermediary was merely passing on the information.

As set out above, it was held that Google was not a mere conduit – an ordinary consumer would not regard it as a mere conduit and in fact it was not. As the Court said, when a user of Google enters a search enquiry “the enquiry is made of Google and it is Google’s response which is misleading”. In its orders, the Court declared that Google engaged in misleading conduct, ordered Google to establish and implement a trade practices compliance program and ordered Google to pay the ACCC’s costs of the appeal.

 

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